Carney Under Pressure As Mortgages 'Unaffected' By Clampdown
Sun 10 Aug 2014
LONDON, ENGLAND - JUNE 26: Governor of the Bank of England Mark Carney delivers the Bank of EnglandFinancial Stability Report at a news conference on June 26 in City of London, England. The Bank of Englandannounced measures to prevent Britain's housing market from overheating including a cap to mortgages and thestrengthening of affordability checks. (Photo by John Stillwell/WPA Pool/) | WPA Pool viaMark Carney may be forced to step in again to cool Britain's roaring property market as a recent mortgageclampdown has turned out to be more of a "gentle dampener than hard brake" on lending to first-time buyers.The Council of Mortgage Lenders said there were 28,600 loans worth a collective 4.2 billion advanced to peopletaking their first step on the property ladder during the month - the best figure since late 2007.This comes after new mortgage lending rules, introduced under the Mortgage Market Review (MMR), came intoeffect from April, which forced lenders to ask home buyers and people looking to remortgage more detailedquestions about their spending habits.Lenders have also been made to apply ''stress tests'' to make sure a loan would still be affordable as and wheninterest rates rise, often applying a theoretical mortgage rate of 7%.In June, the Bank of England governor unveiled plans to rein in Britain's property market that he stressed wouldhave "minimal" impact on the market . Carney defended his "graduated and proportionate" approach, saying thatlenders were now "on notice".The new curbs for the mortgage market, which would be in place from October, mean that loans of 4.5 times aborrower's income or higher should account for no more than 15% of new mortgages issued by lenders.Property expert Matthew Pointon from Capital Economics told the Huffington Post UK that he initially thought theBank of England "did not take enough action to cool the mortgage market.""The MMR had a disruptive effect, but what we're seeing now is the mortage market is coming back," he added.Richard Sexton, director of e.surv chartered surveyors, said: "The bounce back in home lending shows that thetemporary bottleneck caused by MMR has now been alleviated, and the market has returned to steady, healthyhome lending volumes.ON THE BLOG:The CML's director general Paul Smee said that lending levels were on track to "increase modestly over thecourse of the year", adding: "We now feel confident that, as we would hope, the MMR effect is more gentledampener than hard brake."The CML's figures show that first-time buyers taking out mortgages in June typically borrowed 3.43 times theirgross income, compared with an average loan-to-income multiple of 3.33 a year ago. The typical loan size forfirst-time buyers was 123,865 in June, up from 121,500 in May.Chancellor George Osborne previously announced plans to hand the Bank beefed-up powers to control thehousing market, which will eventually see it able to impose restrictions on the ratio of mortgage loans compared with borrowers' incomes, or compared with the value of their house. These new powers are expected to be in place by the end of the current Parliament next May. Nobel Economics Laureate Robert Shiller thinks so, and he predicted the 2007 house price crash. Ronnie O'Sullivan says a huge housing bubble (and crash) will happen. Or in his words: "Baby it's coming." The average price for a three-bedroom house in central London has increased by 729 a day over the last year, equivalent to a quarter of a million pounds, estate agency Marsh & Parsons said. The estate agent firm said the scale of house price inflation meant that prices rose by 19% since April 2013 to an average of 1.6 million, equivalent to 5,120 a week, or eight times Londoners' 658-a-week median salary. Less than one in ten properties in many parts of the UK are affordable to single house-buyers, according to the homeless charity Shelter. Meanwhile, three central London areas are completely unaffordable for couples with children or single people living on average wages: Kensington and Chelsea, Westminster and Camden It's JUST a garage. This tiny lawn in Chelsea sold this month for 84,000, and it doesn't have planning permission or right of way. It sold for 53,000 last September - and you can't do anything on it at all So says independent research commissioned by Shelter . That boy has already started on his first house... It's cheaper to commute from Spain than to live in London. Sir Jon Cunliffe, the Bank's deputy governor for financial stability, has warned that it would be "dangerous to ignore the momentum that has built up in the UK housing market." He also said that the housing market was the "brightest light" blinking on the dashboard of financial hazards that the Bank monitors. While arguing that Britain is not showing signs of a housing bubble, Broadbent admitted that it may be easier to spot with hindsight. Bubbles are things that are things that are far easier to identify after the event than at the time," Broadbent told Radio 4's Today programme.